The euro may not be about to supplant the dollar as the world's reserve currency, the Internet is a bust, and telecommunications companies wasted huge amounts of money bidding for third-generation wireless licenses, but these are heady days for Europe's stock markets. Market capitalization has more than doubled in the past five years, the number of publicly listed companies has grown by a third, and companies like Alcatel, DaimlerChrysler, Nokia Corp. and Vodafone Group have moved beyond the Continent to establish themselves as global powerhouses. Even once-secretive family-run firms, eager for capital, are providing shareholders with unprecedented amounts of information.
But obtaining the insight necessary to make smart investment decisions remains as difficult as ever as information proliferates, knowledge becomes more specialized and market volatility soars. Analysts at investment banks have been in the vanguard of investigating companies, ferreting out trends and, to hear skeptics tell it, pedaling the securities of corporate finance clients.
Increasingly important in Europe's fast-developing equity culture is a group of mostly unsung analysts working at major institutional investment firms such as Allianz Asset Advisory and Management, Axa Investment Managers, Banco Santander Central Hispano, Capital Group Cos., Fidelity Investments and Schroder Investment Management. Like their brokerage firm counterparts, they are responsible for identifying Europe's best investment opportunities. Unlike their sell-side brethren, they often make the investments themselves or advise a portfolio manager seated nearby to do so. And their firms have plenty to invest. In total, Europe's asset managers oversee $16.7 trillion in assets of all types, up by more than a quarter in the past two years, says research firm Sector Analysis. That compares with nearly $20 trillion in the U.S. Europe's pension funds alone now wield E3.8 trillion ($3.3 trillion) in assets, up nearly 20 percent since 1998, according to William M. Mercer Investment Consulting. In deciding how to put this money to use, in-house equity researchers have become more important than ever.
"The research department is the production machine of the whole business," says Simon Fraser, Fidelity's CIO in Europe. "Without a good factory or production, you couldn't build a business."
Skepticism about the objectivity of sell-side research, coupled with Europe's newfound interest in equity and the value inherent in the market, have sent the stock of the buy-side analysts soaring. Five years ago $309 billion-in-assets M&G Investment Management had no in-house research staff and relied totally on brokerage firms for stock recommendations. Today M&G, now a unit of Prudential, has 45 equity staffers who handle both portfolio management and research duties. In-house research has become so important that the buy-siders' ranks are swelling even as money management executives take axes to staff elsewhere while they try to ride out rough markets.
"We rely on the sell side for experience in covering sectors and understanding the dynamics of a company, and they really have their finger on the pulse in terms of trading," says Samuel Morse, head of M&G's equity research. "But we very much rely on the sell side as a supplement. It's important we're not dependent on them. Our investors get the best of both worlds."
Many analysts are giving their best to investors, but among them there are clear standouts. In recognition of their rapidly growing importance, Institutional Investor set out earlier this year to identify for the first time the most accomplished of the buy-side analysts in Europe. To do so, we asked the brokerage analysts who received votes for our 2001 All-Europe Research Team to name the buy-side counterparts they view as truly excellent. On the succeeding pages we profile the 25 top vote getters regardless of sector (almost all track multiple categories). Capital Group (including its global institutional management arm, Capital International Research, and its mutual fund arm, Capital Research Co.) placed six analysts, the most of any firm.
A combination of factors draws top-flight reseachers to the buy side, which tends to be less visible than the sell side and historically doesn't pay as well. A major attraction is the freedom from the marketing and investment banking chores that dominate the lives of many brokerage analysts. Most buy-siders also like the focus on finding and understanding the very best companies and, by investing, marking their ideas to market.
"The big difference on the buy side is that you've got to be right in a way that doesn't matter on the sell side. It's real client money," says John Longhurst, who makes our inaugural European Best of the Buy Side ranking. Currently following everything from chemicals to aerospace, machinery and interactive TV, among other sectors, Longhurst spent a decade at brokerage firms before joining Capital in 1996.
The stakes are certainly higher than ever, as European fund managers look to redeploy their assets across a rapidly changing continent. A single currency, tighter scrutiny of national budget deficits, a unified monetary policy, pension reform and privatization of government monopolies are all spurring economic shifts and underpinning the new equity culture.
Even as macro forces drive the markets, European asset managers have sought researchers to improve their products. Not long ago, some portfolio managers relied heavily on internal research and others didn't. Some used it on occasion and at other times not at all. The result? Inconsistent portfolio returns from supposedly similar investments - and unhappy clients. That's all changing now.
"There's a clear trend toward wanting to own your own research," says Sharon Fay, CIO of European value equities for the Alliance Capital unit Bernstein Investment Research and Management. "We want the best thinking to get into all the portfolios."
To achieve that, asset managers needed more and better analysts. Robert Alster, an Alliance Capital analyst who makes our ranking, says stronger, more tightly integrated research has produced "far more even" results for customers.
The growing dissatisfaction with sell-side research has also helped spur the rise of buy-side research. The well-publicized conflicts of interest that arise as brokerage analysts try to win investment banking business, and the lack of clear sell recommendations, have forced money managers to look in house for ideas. "The sell side is phenomenally overoptimistic. I don't know what they're smoking, but a lot of what they do is utter garbage," says one major investment firm's research chief.
That's not to say sell-side research has lost all credibility; it's merely that the relationship between the two sides has changed. The trick to working with the sell side these days, say money management analysts, is to understand what information to take at face value and what to discard as self-serving. "On balance, they've followed the industry a long time. They know the minutiae. They teach me and pass along their experience," says Alexander Zavratsky, a Fidelity luxury goods, spirits and cosmetics analyst who makes our list. But few institutions actually take sell-side advice in picking stocks. "The value of the sell-side research is their in-depth information, but they're not skilled in knowing how I make investment decisions," Fay says.
Indeed, one of buy-side research's key "value adds," in the words of Gerd Mintz, head of research at Allianz, is an intimate understanding of a portfolio's composition. "We know the portfolio, what the portfolio managers are looking for and what kind of ideas they need. We know exactly what they need to fine-tune a portfolio," says Mintz.
Because investment firms use their analysts differently, it's hard to generalize about their roles. Some firms view the analyst position as a training ground for portfolio management, others create a hybrid position in which the two jobs are combined, and still others treat researchers and money managers as separate - but equal - participants in the investment process. Fidelity, the quintessential American firm, is organized in a hierarchy that mirrors the old British model for investment management. All 20 of the fund giant's European portfolio managers were once analysts. The firm rotates analysts through sectors every two to three years to familiarize them with a broad range of industries before they become portfolio managers. Although the system clearly works for Fidelity (three of their analysts made our list), some analysts say it's tough to gain credibility in such an environment because the portfolio managers are more seasoned and have the authority to buy and sell what they want.
Fidelity's approach differs greatly from that of firms like Alliance Capital and Pioneer Investment Management (a part of UniCredito Italiano banking group). "For us, an analyst is not junior but senior, and a long-term career. They're supposed to know the companies better than the portfolio managers. We view analysts as superspecialists and the portfolio managers as the generalists," says Marco Pirondini, Pioneer's director of global equity research.
Alliance Capital, Capital Group and Pioneer put analysts in charge of a portion of the institution's assets to give them an outlet for their best ideas and to prove their stock-picking prowess to portfolio managers. At Pioneer the analysts directly manage $5 billion (of the firm's total $95 billion) spread over several funds. "It's a very good communications tool. It's a very precise measurement that builds credibility with the portfolio managers," Pirondini says. Portfolio managers are not required to follow analysts' advice, but, Pirondini says, more than 80 percent of the firm's stock picks come from analysts.
Alliance Capital gives analysts even more clout over stock selection. "Our analysts are the stock pickers," says Leslie Manookian, who oversees the firm's portfolio management and research teams. "Portfolio managers construct a portfolio from the picks, deciding on the amount of risk and size of allocations." At Alliance Capital an analyst ranks stocks a 1, 2 or 3 (with 3 the lowest rating) based on five years of financials and an evaluation of the company's strategy, competitive position and management. Portfolio managers are not allowed to purchase or hold 3s. But the 3s don't go to waste; they're candidates for the short positions in the firm's hedge fund.
Today, even at firms in which portfolio managers are more senior, the analyst's role is greatly enhanced. For that, analysts can thank the expansion of U.S. asset managers. "The American model has won out," says Alster, who has worked in the City of London for ten years. "The analysts now are more experienced, have more equal footing with portfolio managers and have greater compensation more geared toward bonuses." Barring a major market setback, their influence will only grow.
This feature was compiled by Senior Editor Jane B. Kenney and Assistant Editor Erika Ihara; the profiles were written by Dan Colarusso, Suzanne Miller, Michael Sisk (who also wrote the overview), John Wagley and Alison Zomb.
david allen
pioneer investments
oil and gas
When Pioneer Investments, which oversees $35 billion in European equities, sought its inaugural oil and gas analyst last summer, it wanted someone with varied experience. David Allen, 38 - who spent 11 years as an Exxon Corp. executive in a variety of engineering, operations and management roles based in New Orleans and London - fit the bill. The Englishman had also run investor relations for three years at British oil and gas exploration company Lasmo, followed by almost a year as a sell-side analyst in Salomon Smith Barney's European energy group. "With his time spent in the industry, on the buy side and on the sell side, David has 360 degrees of experience," says Marco Pirondini, Pioneer's global head of equity research.
Allen quickly put his knowledge to work. After joining Pioneer in Dublin in July of last year, he doubled the size of the firm's weighting in the Italian oil and gas giant Eni (which had purchased his former employer Lasmo). Run by a strong management team, Eni is shifting from a domestic focus to become an international player in oil and gas exploration, which tends to be more profitable than refining. Eni has risen nearly 40 percent, to 15.6, on the Borsa Italiana since it was recommended.
Allen brings other strengths to Pioneer. Going back to his Exxon days, he's got a first-rate Rolodex to put to use. And his IR experience gives him a feel for the tricky relationship between a company and the researchers who track it. "Analysts frequently attribute the wrong importance to an announcement. I spent three years deciding what to say to analysts and investors while experiencing firsthand exactly what my company was doing," says Allen.
He's also impressed sell-siders with his research skills. "He can break up a company's accounting and business units into the smallest parts," says one acquaintance. "It's rare to see someone with a command of the numbers and the industry on the buy side like David."
kamran baig
goldman sachs asset management
autos, industrial, engineering
Kamran Baig has mastered the delicate art of extracting information from his sell-side counterparts without ruffling feathers. The Goldman Sachs Asset Management analyst, whose firm oversees about $30 billion in European equities, has a deft, tactful hand. "He's the kind of person whom all of us respect, and he's probably the best buy-side stock picker I've seen," says one analyst who deals with him regularly. Adds another: "I think Kamran believes I'm pretty good, but I suspect he makes everyone feel that way. He would never humiliate you."
Not that the 38-year-old former design engineer (specializing in road and building foundations) is a pushover: Finesse suits his purpose. "Kamran probably finds it easier to get the information he needs from various sources because he is personally engaging," says one analyst who frequently talks to him. Baig, who tracks automotive, industrial and engineering companies, listens patiently to many opinions, but the onetime Alliance Capital Management analyst (he joined Goldman early last year) is quick to home in on what interests him. "Out of a hundred or so things, he can find the ten that really matter," says an automotive analyst.
Baig is also not given to a lot of navel gazing if a stock doesn't perform as hoped. Although he won't discuss the 40 stocks he tracks, sell-siders who have followed his selections at Goldman and Alliance say he got out of Volkswagen not long before it started on a long-term decline that chopped its stock price in half in 1999 and early 2000; he also unloaded DaimlerChrysler shares early in 1999, when its problems first started to appear. "A lot of fund managers will tell you that selling is the most difficult thing to do," says another analyst.
Baig, who became Goldman's head of European equity research late last year, doesn't just avoid problems. He reportedly took a healthy position in Peugeot just before its meteoric rise started in 1998. The shares have more than tripled since then.
robert alster
alliance capital
capital goods
Shares of Swiss industrial conglomerate ABB Group seemed to defy gravity a year ago, after having doubled in the previous 18 months from Sf25 ($14) to Sf50. An incipient economic recovery in Asia was expected to reignite ABB's growth, allowing it to meet more aggressive performance targets. But Alliance Capital's Robert Alster was skeptical. He wasn't convinced that Asia's economy was back on track and thought ABB would be hard-pressed to meet its growth forecasts. Moving against the crowd, the capital goods analyst urged his fund managers to sell, which they did. ABB shares have since retreated to Sf25. "He sold at the top," recalls one sell-sider. "It was quite a big call to make."
The 40-year-old Alster, who joined Alliance just a couple of months before the ABB call, likes to get his information firsthand: "I don't think it's a waste of time to travel 2,000 miles to see a talc mine or a grotty engineering site," he says. Last November the University of Edinburgh graduate with a degree in philosophy donned a hard hat and boots and toured three New York State quarries run by building materials group CRH to evaluate the Irish company's U.S. operations. He was so impressed that Alliance took a big position in the stock, which has since jumped 35 percent (it's still one of Alster's favorites). "Over the years or months, you see enough of them, and you start to get a very good idea for the culture of the place," he explains.
When Alster, an avid chess player who initially - but briefly - considered an academic career, applied his empiricism to the technology sector last summer, the result wasn't surprising. The stocks had already begun to fall, and he suggested that Alliance portfolio managers, who run more than $10 billion in European equities, cut their holdings. They didn't. The recommendation was right on target, and the shares never recovered. Next time his advice may carry more clout; in June, Alster, a one-time British Coal Corp. energy analyst who has tracked capital goods since he joined Robert Fleming & Co. in 1992, was named head of European research at Alliance.
cedric de la chaise
fidelity investments
insurance
My God, why haven't I looked at that?" one sell-side analyst says he often wonders after meetings with Fidelity Investments' European insurance analyst, Cedric de la Chaise. He is, says another sell-sider, "always extremely well prepared and has extremely meticulous financial models." With so much information at his fingertips, the French-born de la Chaise invariably asks the right questions of CFOs and brokerage analysts.
De la Chaise, 31, joined Fidelity in 1995 as a retail and special-situations analyst after earning a joint degree in business from Middlesex University and Marseille Business School. He took over as insurance analyst in 1998; in keeping with Fidelity's practice of analyst rotation, he now is covering media for the firm, which manages $886 billion in global assets. And he'll be missed: "Insurance is not the most compelling sector in the universe, and I've appreciated his enthusiasm," says one sell-side counterpart.
"It's an interesting sector because it's so difficult to understand," says London-based de la Chaise. "You don't just look at profit and loss and price-earnings ratios; there's a lot of balance-sheet analysis. It's much more about analyzing the quality of earnings versus the quantity of earnings," because insurers can realize investments or massage the value of liabilities to improve returns.
Sell-side researchers find de la Chaise refreshingly open. "Most people are way too guarded," one sell-sider complains.
This desire to be forthright is what drew de la Chaise to the buy side in the first place. Says he, "I'm not too keen on the marketing aspects of the sell side, or the fact that they don't have the full independence of opinion."
adriaan de mol van otterloo
schroder investment management
energy, utilities, media
If he didn't know his stuff, he'd come across as arrogant or rude," says Mark Pignatelli, head of European equity research at Schroder Investment Management, speaking of Adriaan de Mol van Otterloo. Fortunately, the Schroder analyst's "cheeky" approach to the stocks he tracks is backed by "exceptional, in-depth knowledge of companies," his boss adds. Says the 30-year-old researcher of energy, utilities and media corporations, "I just try to get the questions answered that I want answered."
De Mol van Otterloo's persistence may ruffle some feathers, but it produces results. One recent example: Groupe Bruxelles Lambert, a Belgian holding company with a portfolio in energy, petroleum and media shares. De Mol van Otterloo bought the stock in February, when GBL acquired a 25.1 percent stake in privately held Bertelsmann. If the huge German publisher goes public as expected, investors will realize the value of both its holdings and GBL, whose "underlying assets are high-quality," says de Mol van Otterloo. Since its Bertelsmann role was disclosed, GBL shares have jumped almost 40 percent. De Mol van Otterloo explains, "There's still a lot of upside because hedge funds are just starting to get into it."
GBL is a perfect fit for de Mol van Otterloo's unusual coverage area. After a colleague quit about two and a half years ago, the Dutchman added European media companies to the group of energy and utilities stocks he was already tracking. An odd pairing, but de Mol van Otterloo, a graduate of the University of Rotterdam and the London School of Economics, says his analysis of the three sectors comes down to the same elements: "At the end of the day, I want to see the numbers."
De Mol van Otterloo, who's known for talking to a wide variety of sources in covering 25 stocks, is highly regarded for his ability "to penetrate the corporate veil," says a utilities analyst who deals with him. De Mol van Otterloo is well suited to tracking multiple sectors because he does "not take anything for granted," adds one sell-sider.
gerald du manoir
capital international research
consumer products
Don't dial up Gerald du Manoir on a whim. The Los Angeles-based consumer products analyst, an 11-year veteran at Capital International Research, doesn't countenance idle chitchat and quickly dispatches poorly reasoned arguments. "He doesn't suffer fools gladly. He does his stuff off his own back and takes the input from analysts with a slight pinch of salt," says one well-regarded sell-side analyst in London. The 34-year-old Paris-born du Manoir, who has an international finance degree from Institut Supérieur de Gestion, concedes he often plays devil's advocate, but with a purpose: "I just like to push the guys hard to extract their true expectation - how they truly feel about the long-term fundamentals of the company."
Given his California base, the phone conversations with European sell-side analysts are actually very important to him, says du Manoir, who crisscrosses the Atlantic frequently to meet company executives and communicates constantly with Capital's other analysts around the world as he keeps track of 70 European companies. A dapper dresser who favors Gucci suits ("I'm French," he explains), du Manoir believes his distance from the action is a blessing, because it separates him "from the everyday noise."
Du Manoir, say those who know him, is adept at discerning when share performance and fundamentals diverge. Although he won't discuss particular stock picks, others say he has been a longtime supporter of brewer Heineken even though many portfolio managers and analysts turned negative on the shares after they outperformed the Amsterdam stock market by 70 percent from mid-1997 and on into the third quarter of 1998. As the stock began to lose momentum in late 1998 and 1999, du Manoir hung in, reportedly buying more. Since early 2000, Heineken has regained its luster, beating the Dutch market by 45 percent. "He said the techs were overblown and the value of this company would show through. And he has been right," says one sell-side analyst.
Nimble, du Manoir avoided British food and drinks group Diageo when it was formed through the merger of Guinness and Grand Metropolitan in mid-1997, say sell-siders. But after the stock fell about 50 percent between July 1998 and March 2000, du Manoir snapped up what he saw as a bargain. Shares have more than doubled since then.
daisy foquet
putnam investments
media
Last fall many media analysts remained in denial about their sector. Sure, Internet shares had tanked in March, but analysts rationalized that the stocks were coming off astronomical highs, and there had been intermittent signs of revival over the summer. Some even thought the U.S. economic slowdown wouldn't hurt European technology, media and telecommunications stocks. London-based Daisy Foquet, who had left Dresdner RCN to join Putnam Investments in September, took decisive action, slashing the price targets for virtually all of the companies she tracked. "She was one of the first to pick up on the advertising story. She was alive to the ad slowdown in the U.S. and made the natural assumption that it would spread here," says one sell-sider.
Foquet, a 30-year-old native Belgian with a degree in finance from the Free University of Brussels, credits her early experience valuing stocks at J.P. Morgan Investment Management for helping her maintain her objectivity at Putnam, which manages $52 billion in European assets. To understand companies like Mediaset, Pearson and Reuters Group, "I ended up going back to my old models, using discounted cash flows," says Foquet. Comparing companies' price-earnings and price-sales ratios was dangerous, given the shares' still-lofty levels; she preferred to use longer-term measures such as a firm's ability to gain market share.
It's this modeling rigor - the ability to tie industry trends to share price -that has won Foquet respect. "Careful valuation had pretty much gone out the window here," confides one sheepish sell-side analyst. "It's nice to see someone young going after the nitty-gritty and doing careful bottom-up analysis of companies." Foquet's strong interpersonal skills complement her quantitative bent, allowing her to extract additional information from companies and brokerage analysts, say those who have worked with her. "My attitude of life is that it's nicer to get along well with people and treat them how you'd like to be treated," says Foquet. That way, researching companies is "not so Machiavellian."
kristiaan gommeren
j.p. morgan fleming asset management
banking
When Kristiaan Gommeren became a bank analyst in 1989, in-house research at most European asset managers was still in the early development stage and shareholder relations were, well, primitive. Armed with a degree in business economics from the University of Antwerp and an MBA from Columbia University, the new J.P. Morgan Fleming Asset Management researcher trekked from London to Italy to collect banks' bulky annual reports directly rather than wait weeks for them to arrive by mail. Bank CEOs were often visibly disappointed to find out that Gommeren represented a sizable investor and not a brokerage firm that might write a laudatory report. Today the 39-year-old analyst values his pioneer's perspective: "It's quite nice to be able to relate to what banks used to be."
So do his colleagues on the sell side. Says one, "He has a very good pan-European knowledge of the market, which I think is a rare stock on either the buy side or the sell side."
Gommeren's current picks range across the pan-European landscape. He particularly likes Société Générale and BNP Paribas for their earnings mix (international specialized finance subsidiaries as well as retail), clear management strategy and low valuations. He recommends Barclays and Royal Bank of Scotland - undervalued, well-managed companies operating in a relatively stable U.K. economy - as defensive plays. He's also positive on Switzerland's UBS and Credit Suisse Group, thanks to his belief in their blend of investment and private banking businesses.
Having lived through the emergence of pan-European banking, Gommeren now has to cope with banks' global reach. He's already visited Latin American subsidiaries of Banco Bilbao Vizcaya Argentaria and Banco Santander Central Hispano and ventured to Hong Kong, Malaysia and Singapore to view HSBC Holdings and Standard Chartered units firsthand. "It's a continuous investment in terms of time and effort, but it can give you an information advantage over time," says the well-traveled analyst.
arthur gromadzki
capital international research
autos, auto parts
By 1996 French automaker Renault had fallen out of favor with investors, who doubted that management could pull off an ambitious restructuring that included closing three plants in labor-friendly countries. But Capital International Research's Arthur Gromadzki saw things differently. At Gromadzki's suggestion, his firm's money management affiliate, which oversees about $550 billion in institutional assets worldwide, accumulated Renault shares until it held 8 percent - worth roughly $500 million - making it the auto company's third-largest shareholder. Renault succeeded in the restructuring (despite widespread labor protests), and the shares soared, rising from the equivalent of E16 ($13.96) to about E60 by mid-1998. "Once I know all about the companies, I try to identify the points of changing profitability, because this is the moment when you can earn the highest return. But to do that, you almost always have to go against the crowd," says the Polish native, who studied civil engineering at the Technical University of Szczecin.
Having tracked the auto and auto-parts industry at Capital since 1987, Gromadzki, 47, is in a rare position to challenge the majority view. He saw an opportunity in late 1997 at another struggling French carmaker, Peugeot. Again, Gromadzki, who earned an MBA from the International Institute for Management Development in Lausanne, Switzerland, believed a restructuring, coupled with the introduction of a couple of new models, would turn the company around. He was right. The stock, trading at about E20, had jumped to roughly E60 by early this year. As one sell-sider says, "He is not a prisoner of the short term."
nicholas grace
capital research co.
technology, internet, basic materials
In June Nicholas Grace tried to climb Mt. Rainier in the U.S.'s Washington State, ascending three quarters of the 14,410-foot active volcano before heavy snow forced him off the mountain. Unfazed, he packed up his gear and flew off the next day to grill management at a software company in Florida. An avid climber who summited Kilimanjaro last year, the 35-year-old New Zealander isn't one to take foolish risks - or waste time second-guessing himself. He finds parallels in his work as an analyst. "The training and the slog of getting up there is very similar to what I do in my job. It's all about physical and mental endurance - basically setting a goal. It's hard work and teamwork, which is very important."
Hard work and determination have enabled Grace to become one of the buy side's top technology, Internet and basic materials analysts in just three years. A first-rate number-cruncher, Grace, who earned his MBA from the University of Wisconsin, draws on the discipline he learned earlier in his career as a commodities researcher at J.P. Morgan Investment Management in New York and Australia. "He'll try to simulate worst-case scenarios on most of the companies and to check the implied price-earnings, so he ends up with what he calls 'trust' P/Es," says one sell-side analyst. "He makes his investment decisions if these trust P/Es are acceptable and only if they're acceptable. It's quite demanding criteria." The buy-sider's exacting approach to areas like the mobile Internet sector wins high praise.
Grace declines to discuss stock picks, but a sell-side analyst says the London-based researcher spent time this past spring calculating the downside of CMG, an Anglo-Dutch wireless communications company. The stock had already plummeted more than 75 percent from its February 2000 high, and many investors felt it was a bargain - or at least could do no worse. After researching the stock, Grace decided to steer clear. Just a couple of weeks later, CMG issued a large profit warning, and the stock nosedived an additional 45 percent through mid-July. As on Mt. Rainier, it's wise to avoid the worst outcome and prepare for a new opportunity.
steven ho
j.p. morgan fleming asset management
chemicals, pulp and paper, steel, energy
"I see things in a basic way," says Steven Ho of J.P. Morgan Fleming Asset Management. "Is what I hear from the company consistent with what they are doing? After a meeting I ask myself, Has the opinion I've formed been refuted or confirmed?" Unfortunately, the answers aren't always clear-cut; thus Ho, a self-described "boring geek," must pore over the minutiae in a company's financials. Determined to test and retest his investment ideas, Ho excels at parsing the obscure. As one sell-side counterpart says, "Of all the people on the buy side we see, he has the greatest interest in detail."
The 43-year-old Ho brings to his work a distinctly worldly view: Born in the U.K., he grew up in Singapore (where he's a citizen) and Malaysia and earned a finance degree in the U.S. at Boston University. In 1984 he joined J.P. Morgan (which now manages £40 billion in European equities) and since then has twice shuttled back and forth between the firm's London and Singapore operations. In his second tour in Singapore, in 1993, Ho headed Morgan's research effort, helping to build its asset management presence there. In 1997 he returned to London, where he now tracks chemicals, pulp and paper, steel and energy.
To combat the emotional attachment to portfolio holdings, Ho creates a "road map" for each stock he tracks: He identifies five or six factors likely to affect the shares in the near future. Depending on which and how many of these factors occur, Ho adjusts his buying or selling of the shares. Using this discipline, he bought Corus Group, a steel and aluminum producer that resulted from the merger of British Steel and Koninklijke Hoogovens, in late March, netting a roughly 45 percent gain in just a couple of months before unloading the shares, according to sell-siders.
Having lived on several continents, Ho readily puts individual companies and their managements into a regional context. "The nuances are very important," he says. "The words can sound the same, but their meaning is different."
william johnston
alliance capital
financial industry
William Johnston's broad vision sets him apart from most of his European peers. "When you have a global perspective on the financial industry, you hit connections quicker, you see trends earlier," says one London-based analyst who knows him. Indeed, the four-year Alliance Capital veteran - who also manages the firm's global financial services fund - is often used as a sounding board by sell-siders with new ideas. "It's quite hard to add value to someone like him," says a brokerage analyst. If you can, you know your idea has merit, he adds.
One of 13 Alliance analysts worldwide tracking financial stocks for the $433 billion-in-assets giant, Johnston, 40, is so well versed in his specialty that his stock picks often defy conventional wisdom. Although he won't discuss individual stocks, Johnston acknowledges that he favors French and U.K. banks right now. Investors, he says, don't fully appreciate the French institutions' potential to improve returns on equity. U.K. banks are among the most efficient in Europe and offer a solid defensive play because they're not overly reliant on market-sensitive revenues. Sell-siders say Johnston stood by Standard Chartered, which has a major exposure to emerging markets, through a roughly 25 percent decline in its shares early this year. The U.K. bank's stock regained about half the loss by early summer (though it's fallen again since).
Johnston, who completed his undergraduate studies at the University of Cambridge, says he first became interested in research when he was studying the secondary loan market for his MBA thesis at London's City University. He offers this perspective on his selections: "You have to be focused enough never to lose sight of fundamentals and to filter out the noise of the market. At certain points you have to be contrarian enough to pick stocks that may be depressed." He looks for banks that can grow their revenues without increasing their risk profile. That, he concedes, will be difficult in 2001. "Growth will be seen as an increasingly rare commodity."
john longhurst
capital international research
capital goods, chemicals, aerospace, technology
John Longhurst brings a rare perspective to the differences between buy-side and sell-side research. The 34-year-old Capital International Research analyst - who received more votes than any other researcher in our survey - spent a decade on the sell side, working at James Capel Stockbrokers and UBS before taking his current job in 1996. "People often say the buy side is easier than the sell side, but the big difference on the buy side is that you've got to be right in a way that doesn't matter on the sell side. It's real client money," he says.
The U.K.-born Longhurst invests real money in far more sectors than his sell-side counterparts follow. He tracks more than 100 companies in such global industries as chemicals, defense and aerospace, European machinery, interactive TV, satellite service and video games. It's not a job for someone with a delicate ego. "Being wrong every day keeps you humble," says London-based Longhurst, who never attended college and modestly attributes his success to "perseverance and good fortune."
Longhurst's hard work has made him "scarily informed" about the companies he tracks, says one sell-side colleague. But it's not all facts and figures: Longhurst is very good at challenging management assumptions, provoking discussions that reward both management and his clients. Noting Longhurst's preference for one-on-one meetings, another sell-sider says: "He stimulates debates in a way that might show management how better to steer their company. I could just imagine a CEO coming away from a meeting pretty stimulated."
Longhurst attributes his focus on longer-term issues in part to Capital Group Cos., which manages roughly $550 billion in institutional money. "You can't identify meaningful long-term trends unless you're part of a culture that rewards long-term performance," he says of the employee-owned firm. "When you've talked to senior executives of a company for ten or 15 years, both sides approach the discussion from a different angle. Time and context become more meaningful" in the relationship, he says.
Given this long-term focus, does Longhurst ever take time to pat himself on the back? "For approximately five minutes on the first of January - only if your client's portfolio does well."
jean-daniel malan
lazard asset management
utilities, media
Jean-Daniel Malan is one quick study. Just 26, Malan, a utilities analyst who has spent just three years at Lazard Asset Management, stands out for his intelligence and energetic information gathering. "Most people take years to get to a certain level of knowledge, and he got there in 18 months," says an energy analyst at a major brokerage firm.
To hear Malan talk, though, his interest in equities has been a nearly lifelong affair. When he was 7 or 8 years old, Malan began studying the stock market. It quickly became a passion. "It was always more than a hobby," he says. He attributes at least some of his fascination with the market to an interest in human psychology: "You have human beings running the companies, and understanding these people is the name of the game. If you do it with real passion and interest, it's a really fun game." After earning a finance and economics degree at Paris's Université Paris Dauphine in 1998, Malan interned at Lazard and was asked to join the firm full time after a month. Although he has followed utilities the longest, he already has started delving into media and retail.
Malan is known for looking ahead. "He's usually one shot ahead of the competition and the market," says an analyst who speaks with him regularly. Sell-siders know to contact Malan quickly as they gather information. "He likes the warm news rather than a comment three days later," says a researcher at a big investment bank. Those who know him (he will not discuss stock picks) say he has been very successful with Suez Lyonnaise des Eaux, the second-largest utilities group in France, whose shares have jumped more than 40 percent this year. He's also said to have backed E.On, Germany's largest utility, which rose more than 20 percent last year before giving back some of its gains and then surging again this year. "His key skill is projecting himself maybe two years down the road. He can say, 'Here is what the company is going to look like, and here is my bet.'"
john mant
capital international research
banking
Early last year many analysts were expecting Internet distribution of financial services to displace traditional branch banking. Not Capital International Research's John Mant. Instead, he continued to recommend Sweden's Svenska Handelsbanken and turned positive on the depressed shares of Royal Bank of Scotland (see Banking, page 18), two well-managed institutions with extensive retail networks. The London-based analyst also shifted to negative on then-hot investment banking and asset management stocks, which he didn't think could sustain their gains. He was right to buck the consensus. Svenska Handelsbanken rose 49.5 percent in 2000, and Royal Bank of Scotland gained 44.3 percent, while brokerage and money management shares fell.
The 40-year-old Mant, who also serves as European research director for institutional business, has been making astute calls at Capital International for 11 years by taking the long view. "He was outstanding during the 1998 market crisis, keeping his big-picture perspective and buying at the bottom," says a sell-side acquaintance. "He's very good in volatile markets."
What one sell-sider calls Mant's "near-encyclopedic" banking knowledge has developed over two decades. With a degree in philosophy and economics from the University of Oxford and an MBA from London Business School, Mant began his research career at J.P. Morgan Investment Management in 1986. A year later he moved to the sell side, joining the strategy team at James Capel & Co. Even before the Morgan post, the London native had gained valuable experience in loan syndication at Marine Midland (now part of HSBC Holdings).
Mant attributes some of his success to Capital International's "cluster" system, in which the firm's global team of sector analysts share information and insights. An international research effort is a big advantage in monitoring a European institution with a huge global business, like HSBC, says Mant. And Capital International's incentive system, based on an analyst's four-year performance, allows him to look beyond the next quarter and evaluate longer-term trends. As a result, Mant can afford to follow his instincts and bet against the crowd.
sarah marshall
putnam investments
business services, luxury goods, beverages, cosmetics
Sarah Marshall may have just two years' experience as an equity analyst, but she's hardly new to the companies she covers. Before joining Putnam Investments in London, she spent five years as a McKinsey & Co. consultant, based in New York and London, working with many of the same sorts of companies - a wide range of concerns from business and employment services to luxury goods, beverages and cosmetics - that she now evaluates. "As a consultant you develop the ability to look at a company to understand what its strategy is, how attractive its market is and what its management looks like," says the 33-year-old Marshall, a graduate of Trinity College, Oxford who has an MBA from Stanford University. "It's also a good discipline in the markets as far as not getting too involved in the details but rather thinking about the big picture."
That discipline paid off. Marshall, for one, avoided the market euphoria for Randstad Holding, the Dutch temporary employment agency. After its stock tripled and then lost some of its momentum, Randstad still had a devoted analyst following in late 1999. Marshall believed the tight Dutch employment market had peaked and downgraded the shares. The stock has since dropped from about E50 ($44) to roughly E12. "Avoiding some of the losers in the sector has been a great skill of hers," says one sell-sider.
Marshall, who covers 20 firms, has also selected a few winners, having backed Securitas, a Swedish company that provides a variety of security services ranging from guards to armored cars. In the midst of three large acquisitions, Securitas started to have problems at its smaller units. The stock fell from a peak of 240 kronor ($23) early in 2000 to Skr160 by year-end; many investors foresaw further declines, but Marshall believed that management could solve the problems. She advised buying: the shares have since jumped to about Skr190 in a weak European market.
olivier minaud
axa investment managers
consumer products
Last fall Olivier Minaud began to pick up hints of trouble at Carrefour, Europe's leading supermarket group and a bellwether for French investors. The 33-year-old Paris-based consumer researcher believed the company was having difficulty integrating some of the brands from its 1999 E15.6 billion ($13 billion) merger with Promodès, another French retailing giant. Convinced that Carrefour couldn't meet aggressive 2001 performance targets, Minaud turned negative on the shares. Soon after, the stock started to slide. On March 8 Carrefour confirmed that it wouldn't meet its profit and sales growth projections this year, and by March 19 the shares, at E80 last fall, were down to E56.15, a 52-week low from which they've recovered only a few points.
"One thing that's very important for us is to get a good look at the trend and what will be the driver of growth," says Minaud, a chess enthusiast and avid tennis player. "We want to be convinced by the strategy, not just the P&L or balance sheet." The soft-spoken graduate of Université Paris Dauphine won't discuss individual stocks (the Carrefour account comes from sell-side analysts). Those who know him say the recommendation to sell a popular local stock was typical of his independent-minded coverage. A food retailing, luxury goods and cosmetics analyst for the past ten years - four at insurer Groupe Azur and six with Axa Investment Managers - Minaud says he's always trying to square a company's projections with the soundness of its plan and actual growth.
To keep up to the minute on the 25 stocks he follows, Minaud is said to have very frank communications with corporate executives. "He tells management exactly what he thinks," says one acquaintance. And although he values the input of sell-side analysts, Minaud isn't about to let them get between him and management: "We prefer to have the company's point of view because there's the concern the sell side might have conflicted interests," he says.
Indeed, the freedom to reach unbiased decisions and see them implemented is a key attraction of a buy-side firm like Axa, says Minaud. Axa portfolio managers must follow analysts' buy recommendations but can disregard sell advisories. They reject Minaud's counsel at their peril.
christiane pratsch
gartmore investment management
oil, oil services
Leave it to Christiane Pratsch of Gartmore Investment Management, overseers of $70 billion in European equities, to extract important information from edgy corporate executives without leaving bruises. "She's very smart and asks questions in a low-key, successful way that doesn't upset the clients," says one brokerage analyst who has watched some of these sessions. "Yet they are killer questions."
The 32-year-old American hasn't just impressed her sell-side peers. In April 2000 she was promoted to deputy head of equity research at Gartmore, while keeping her global oil and oil service research duties. A 1991 economics graduate of Rice University, Pratsch joined Credit Suisse First Boston in Houston covering oil and gas. After a stint in CSFB's London office, she earned her MBA at Columbia University in 1996 and spent the following two years back in London at Lehman Brothers, covering European oil and gas. Seeking a broader geographical coverage area, Pratsch joined Gartmore in 1998.
According to those who have worked with her, Pratsch not only can pry information out of corporate executives, but she also uses the sell side as an effective sounding board. "She'll call us and ask, 'What do you think?'"says a sell-sider. "We almost help each other in terms of developing ideas." Pratsch is quick to praise her sell-side counterparts: "I like to tap into all the teams on the sell side. I'm very appreciative of their work, which helps me build my own models."
What she's seeking is companies that consistently find ways to deliver earnings surprises. "We're always looking for unexpected earnings growth over a variety of time horizons to help revise price targets." For instance, she says, France's TotalFinaElf is a long-term holding of hers because of its continuing ability to please the market with unexpectedly strong earnings. This has helped the stock outperform the European oil sector by 70 percent since Gartmore added it to its portfolio early in 1999. More recently, Pratsch has been spending time studying companies in Russia, the Caspian Sea area and China with an eye toward tapping the next source of profitable surprises.
james rutherford
capital international research
basic materials, mining
Buy-side analysts and portfolio managers are sometimes accused of hiding behind sell-side research: surveying brokerage analysts on a certain stock, then adopting the consensus view as their own. No one would think to level that charge against James Rutherford of Capital International Research. The 41-year-old London-based European and emerging-markets basic materials and mining researcher is renowned for aggressively chasing down his own information and reaching his own conclusions. "To call him and say, 'Buy this stock' isn't enough. He wants insights," says a metals analyst at a brokerage. Pursuing these insights keeps Rutherford on the road nearly half the time. As he puts it, "We use up a lot of shoe leather in trying to develop an understanding of the companies."
The hard-won insights give Rutherford the confidence to take contrarian stands. Although he declines to discuss particular stocks, Rutherford has stood by British Billiton, a leading aluminum, nickel and coal producer that was hard hit during the Asian financial crisis in 1998, according to sell-side analysts. The company merged with Australia's BHP in March to create BHP Billiton. Even before the marriage, Billiton shares had increased sevenfold from their August 1998 lows. "Rutherford's strong at doing homework on management teams, and those are the kinds of insights that made him hold on to DeBeers [De Beers Consolidated Mines is said to be another profitable longtime holding] and Billiton when others didn't," says a brokerage analyst.
Rutherford has a master's degree in economics from the University of Sussex and paid his dues on the sell side covering mining and natural resources for HSBC Securities from 1993 to 1997 (He ranked third in Institutional Investor's 1996 Latin America Research Team for Metals & Mining). "The culture at Capital is to have a clear focus on the underlying fundamentals and to be able to step away from the short-term view of a company," Rutherford says. He has mastered both disciplines.
sacha sadan
universities superannuation scheme
consumer products, retail
Running a government pension fund can teach you to do more with less. The London-based Universities Superannuation Scheme for employees at British universities has a staff of 15 analysts and portfolio managers to oversee its $30 billion in assets; a private manager handling a similar sum might employ twice the investment staff. As a result, Sacha Sadan, who tracks consumer goods and retailers, and his colleagues can't afford to squander opportunities.
Consider Sadan's impeccable timing with discount clothing retailer Matalan. Though he won't reveal his stock selections, knowledgeable sell-siders say that having owned the stock for a year, Sadan believed the shares, up nearly 185 percent in 12 months, had little upside by last November. So he sold. A month later, Matalan issued a profit warning because of some inventory problems, and the stock immediately dropped 50 percent. Then a couple of months later, say those familiar with his actions, Sadan jumped back in. Matalan shares have since gained 25 percent.
The 30-year-old Sadan, who manages the $6 billion U.K. equity piece of USS' fund, has beaten the FTSE all shares index over the past five years. "He has a good clarity of thinking. He's driven by a top-down view of stocks and doesn't get caught up in the minutiae," says a well-regarded beverage analyst who knows him.
Not that Sadan and the crew at USS have much time for minutiae. They cover stocks in Europe, the U.S., Japan and the Far East and meet regularly with management of the companies they invest in. It's not unusual to have 20 sessions with companies in a month, Sadan notes. "We do a lot of background work, so when we sit down with management, we get to ask them questions we want to instead of what they want to tell us," says Sadan. Communication within the team is essential.
Although best known for tracking consumer stocks, the Manchester University graduate says he really follows the entire U.K. equity market. "He's a bit like a laser in focusing on the factors that make stocks move," says one London-based analyst. "It's hard to find something he doesn't already know about."
andrea shen
government of singapore investment corp.
aerospace, information technology services, multi-industry
Andrea Shen, a London-based analyst for the Government of Singapore Investment Corp., wins widespread respect for dedication as well as the depth and breadth of her knowledge. She gains that, in good part, on the road, traveling about 60 days a year, including two annual trips to Singapore as well as journeys within Europe and to the U.S. to meet with corporate executives mainly in the aerospace, information technology services and multi-industry sectors.
"She's an analyst who is truly internationally oriented, so she cares not only about European companies, but has the global perspective," remarks one sell-sider.
Shen, 31, graduated from Brown University and holds a master's degree in international affairs from Columbia University. She started her research career on the sell side in New York at Lehman Brothers, working for three years for aerospace and defense electronics analyst Joseph Campbell, who ranked third in 2000 on Institutional Investor's All-America Research Team. She credits him with giving her a strong foundation in both qualitative and quantitative analysis. Shen, who worked as a research assistant at Barings Securities and Merrill Lynch & Co. while in graduate school, still relies on many of the techniques she learned at Lehman: "While all sectors have their quirks, the fundamental aspects of looking at a company are the same."
After a short stint at Bear, Stearns & Co., she left to join GIC, which runs more than $100 billion in total assets (about 40 to 50 percent in equities); she became part of its seven-member London-based research team four years ago. Working for Singapore's huge investment arm, she notes, isn't exactly a civil-service position: "The only thing about the GIC that's government is the title - we're really a private company. We just happen to manage the federal reserve."
Although she declines to detail her stock picks, Shen, who also manages some money for the fund, says that Germany's SAP could be a beneficiary as systems integration takes hold. "And business process outsourcing [payroll, 401(k)] is equally big, so companies like EDS in the U.S. and Capita in the U.K. are good names, as they each have outsourcing as a large percentage of their business." The latter group, she adds, is fairly defensive because long-term contracts limit risks.
aled smith
m&g investment management
technology, media, telecommunications
Content is king for Aled Smith. The 33-year-old technology, media and telecommunications researcher and portfolio manager at M&G Investment Management pays close attention to what companies create and then estimates what those products will be worth years down the road. To do so, he tracks broad themes that take him outside the standard media arena, into such areas as pay-TV, education and even software for hospital administration. The British analyst "stands out because he views the whole concept of convergence at a very high level. Very few buy-side analysts do what he does," says one sell-sider.
A former Coopers & Lybrand consultant, Smith joined M&G, with more than £130 billion ($186 billion) in European assets, in December after eight years at J.P. Morgan Investment Management, where he had great success with Rupert Murdoch's British Sky Broadcasting Group and Pearson. He captured most of BSB's 325 percent rise between the first quarter of 1999 and the end of the second quarter of 2000, while catching much of Pearson's 120 percent gain. Equally important, he unloaded both stocks before they tanked. Each has lost more than 50 percent of its value since its peak.
Smith left Morgan for the chance to run M&G's Global Media and Communications Fund, which is thought to hold Apollo Group, Houghton Mifflin Co. and McGraw-Hill Cos., as well as AT&T Corp., Liberty Media Corp., Société Européenne des Satellites and Sprint PCS Group. (Smith will not comment on stock picks). M&G's offer to "start from scratch" in building the new fund - opened in February, it has £24 million in assets - was too much to resist for Smith, who remains unfazed by the past year's free fall in Internet stocks: "It's a very lucky time to be running a thing like this as we go from an analog world to a digital world."
michael weston
merrill lynch asset management
consumer products
The consumer goods stocks that Michael Weston follows have become a haven for those fleeing technology shares. That's good for his sector but leaves him with a tough decision. "We have to decide when to lighten holdings in these defensive stocks; then we can get back to fundamentals," says the Merrill Lynch Asset Management analyst. The University of Cambridge graduate with an MBA from Cranfield University hasn't pulled the trigger yet, but his finger is itchy.
Few buy-side analysts are in a better position to make the call. Weston spent most of his 11-year career with hedge fund Hermes Capital Management, where he ran its small-cap stock research. In 1997 he moved to Merrill, which manages $149 billion in Europe, the Middle East and Africa, for the opportunity to research larger-cap chemical stocks. He later took on consumer stocks and now oversees £1 billion for pension accounts. In September Weston is taking another buy-side position at a firm he declines to name.
The 36-year-old Weston has what one fellow analyst describes as "an independent brain." To get the inside story, he is tireless in visiting companies to "see the state of facilities, see how unified the operations are." What's he seeking? "I'm looking for consistency both in the story they're telling investors and in the operations." He also wants time with top management. "The basic objective is to earn the respect of the CEO so they speak directly to me. If I can do that, I have a degree of confidence in my decisions," he says.
It's this sort of diligence that led him to steer clear of Koninklijke Numico, on which he has been very bearish. The Dutch company, which owns General Nutrition Centers vitamin stores in the U.S., saw its shares fall 25 percent in just a few weeks straddling 2000 and 2001. The stock has yet to recover.
robert von rekowsky
fidelity investments
central and eastern european markets
When Fidelity Investments sent Robert von Rekowsky to London from Boston in 1996, he was supposed to stay six months - long enough to get better acquainted with his fellow emerging-markets sovereign debt colleagues. Today the 35-year-old analyst and sometime academic is still in London, but he has forsaken debt to track 50 Central and Eastern European stocks. What happened? "I never expected to find a job where I could mix politics and history-in-the-making with finance," says the U.S.-born von Rekowsky, who has direct input into the investment of about $1 billion of Fidelity's $45 billion in European equity assets. "I love coming to work every morning."
Von Rekowsky, a graduate of the State University of New York at Albany who holds a master's degree in international relations and politics from Boston's Northeastern University, has won a reputation for excellent contacts and wide-ranging intellectual curiosity. Last year, for example, he made a thorough analysis of giant Indian pharmaceuticals company Dr. Reddy's Laboratories even though it was located well outside his coverage area. Why? It was trading at 36 times earnings, and one of the stocks that von Rekowsky does follow, Croatia's Pliva, had a multiple of only 12. He wanted to see why two companies in the same business traded at such divergent prices. Ultimately, says a sell-side colleague, von Rekowsky decided both stocks were mispriced and abandoned the comparison. But the exercise persuaded the sell-sider to reexamine Pliva.
Von Rekowsky won't discuss specific stock picks, but he's said to have avoided Mol, the Hungarian oil and gas company, despite general market enthusiasm for the stock. The shares traded up sharply in January but have since plummeted. "It's been a great call," says a sell-side analyst. Describing his investment philosophy, von Rekowsky says, "I do like to get to the bottom of something so I have the conviction of why I believe in it, whether good or bad."
alexander zavratsky
fidelity investments
luxury goods, spirits, cosmetics
Alexander Zavratsky seems to understand that friendly sell-side researchers can become important allies in covering an industry. The Fidelity Investments analyst is, says one sell-side researcher, highly considerate of his counter-
parts: "Alex responds to the quality and quantity of service we provide him, is good at returning phone calls and shares knowledge." His own hard work, plus his growing intelligence network, allow the 27-year-old luxury goods, spirits and cosmetics analyst to "know things before everyone else" on the buy side, says this brokerage analyst.
Zavratsky, who spends an average of one day a week visiting at least one of the 46 companies he follows, enjoys the hands-on aspect of his job. "The cool thing about luxury is you can form your own opinion of a product. You can actually see a product and get a feel for it, see why a new product is different and how it's going to be better than the last one," he says. And after five years as a Fidelity researcher, Zavratsky isn't overwhelmed by the charms of a high-gloss industry. "He's a fair youngster and seems well able to look management square in the eyes. It's quite easy to be won over by some of the executives at Louis Vuitton or Prada," says a sell-side counterpart. Zavratsky won't discuss his recommendations, but those familiar with his thinking say he caught a good portion of Cie. Financière Richemont's run-up. The Swiss tobacco and luxury goods company's shares have roughly tripled in the past two and a half years.
Some researchers believe Fidelity's system of rotating its analysts every couple of years helped shape the Boston College alum's level-headed approach. When Zavratsky first arrived in London in 1998 he tracked the telecommunications business. "Coming from covering the tech sector, he has a reasonable grasp of what it means to see a stock very overvalued. He has a lot of experience looking at unrealistic promises," says another analyst.